COLOMBO, March 4 (Reuters) - Sri Lanka will start storing
bunker fuel at the $1.5 billion Hambantota port in June, a
senior official said, after years of delays to the Chinese-built
installation that sits on strategic shipping lanes, and a key
step to making it commercially viable.

The state-run Sri Lanka Ports Authority (SLPA) originally
had plans to open the facility for ship fuel in May 2011, six
months after President Mahinda Rajapaksa launched the port in
his home town on his 65th birthday.

"We are about to get the test samples in March. Then we will
do the trials. After that we will start proper bunkering
operation in June," Priyath Wickrama, chairman of the SLPA told
Reuters in an interview.

The $130 million storage project contains eight tanks of
bunker oil for ships and six tanks of aviation fuel and LPG.

The port is envisioned as a refuelling and service point for
cargo ships which pass a few kilometres away off the southern
tip of the Indian Ocean island nation, on one of the world's
busiest East-West shipping lanes.

The growing influence of China in Sri Lanka has worried
India, a neighbour that feels hemmed in by a string of similar
port developments stretching from Myanmar to Pakistan and that
it fears give the Chinese navy a strategic boost in the region.
However, the ports are designed for commercial operations and
are mostly not yet fully operational.

China has lent $400 million for the first phase of the new
port in Hambantota and another $810 million has been given for
the second phase with China Communications Construction Company
as the contractor.

Wickrama said the expected handling volume in 2013 is about
45,000 metric tonnes (mt) of ship fuel, rising to 125,000 mt in
2015. China Exim Bank has loaned $77 million for the terminal,
which the ports authority will operate.

RAJAPAKSA CITY

The port is part of Rajapaksa's push to turn Hambantota, a
fishing village ravaged by the 2004 tsunami, into one of Asia's
leading commercial cities. Hambantota is set to be Sri Lanka's
biggest port once the second phase is completed.

Rajapaksa's ambitious plans for his home town following the
end of three decades of civil war in 2009 have already helped
build the country's second international airport, a
35,000-seater cricket stadium that hosted 2011 World Cup games,
and a massive convention centre, mostly financed and built by
China.

The port, airport and the stadium are all named after
Rajapaksa, who is still hailed by many for winning the war
against Tamil Tiger separatists, despite international concerns
about rights abuses in the intense final months of hostilities.

The Mahinda Rajapaksa International Airport is due to open
on March 18, after being built with a $209 million Chinese loan,
with China Harbour Engineering Company building the first phase.

An entire new commercial city is planned. A smooth four lane
highway has slashed travel time to the capital Colombo, while
South Korea is helping build the international convention
centre. Shangri-La Asia Ltd is building a resort due
to open in 2014.

But the viability of the whole plan will depend largely on
the success of the port, which has had a rocky start and is
increasingly criticised for its low returns on investment.

Thousands of ships were meant to use Hambantota port soon
after its November 2010 launch as an alternative to Singapore or
Dubai, and unload goods to be moved across Asia and Australia.

But, after the lavish opening ceremony, Sri Lanka had to
seek an additional loan from China to remove an undersea rock
blocking the mouth of the port, a hitch played down by Wickrama.

"Unfortunately due to certain clearance issues, there was a
slight delay," he said.

For now, the main traffic comes from local tourists gawking
at the long breakwaters, along with the occasional ship laden
with cars. The government ordered all car imports to come
through Hambantota in July 2012, to unclog the capital Colombo.

Rajapaksa's political rivals say the move was also aimed to
give some life to the facility, where the gilt is peeling from
the president's name emblazoned at the port's entrance.

Wickrama said Sri Lanka has already secured $700 million in
investments, including $220 million from India's Shree Renuka
Sugars Ltd to handle some 500,000 tonnes this year.

The Ports Authority expects another $1 billion in investment
through requests for proposals by May, he said.
(Additional reporting by Ranga Sirilal and Frank Jack Daniel;
editing by James Jukwey)